Why does Supply Chain seldom run in the first three?

James Small of Carrigan and John Whitehead of Six Degrees hosted 12 Supply Chain Directors at an executive round table event last month. In this article James discusses the role supply chain leaders play at executive level.

The form guide reads - GM Supply Chain – solid performance last time out when going did not suit. Stronger company here, place bet only.

I fondly remember a Managing Director explaining their executive decision making process to me. When decisions were large and time critical, that Managing Director had what they called the short line-out. The MD, CFO and Sales Director would meet and make the decision, then inform the rest of the executive team. We all know that two-tier executive teams exist, what perplexes me, is the lack of representation that supply chain have in the core executive team (the short line-out).

We analysed 150 companies and determined the make-up of their core executive team. No parent will ever admit to having a favourite child, so the analysis is through observed outcomes rather than survey.

"The results show that in only 16% of occasions the supply chain executive is considered part of the core executive team".

The proportion is 20% in the consumer goods segment, and less than 16% in industrial. A couple of factors influence these findings:

If the organisation was progressive enough to combine all the elements of plan, source, make, deliver under the supply chain function, it was most likely that the supply chain was in the core team.

Financials are the common language of business, where the supply chain costs are high supply chain was part of the group, although it was more likely to be an Operations Director that also had supply chain accountabilities.

If we are to believe that the supply chain is a key part of competitive advantage, then why is this not reflected in our organisational structure or more importantly viewed as a political power base and a key decision maker.

What can we do about it?

Help define core versus non-core capabilities

Seems to come down to what a business considers core v non-core capabilities – unfortunately many CEOs do not see supply chain as a driver of competitive advantage, but as a cost centre. Supply chain is not valued as a core competency. If your CEO had a choice, would they outsource the supply chain? If they would be even tempted, then you have an issue. It is too easy to be a victim and wonder why the business does not get us. What we should be asking is – how do we actively engage the business in the value that we can deliver?

As a Supply Chain leader, where is your time going?

How is the business using the supply chain? Does it understand and manage our strengths and weaknesses? How do we even stop these questions sounding like us and them? Are you building competitive supply chains based on market and competitive needs or managing a function?

The supply chain leader needs to be an integrator and driver of change across business functions. Take a little time to look at your supply chain structure and ask yourself, how are you actually making resourcing decisions?

Change the narrative – the answer is YES, with implications

"At a most fundamental level, the supply chain leader is a product of their environment".

If your supply chain capability is low, then unfortunately the supply chain narrative is negative. You are at some level the purveyor of cost, doom and constraint. Internal and external collaborations get drowned in the language of constraint, fixed, firm rather than managing for flexibility and responsiveness to change. Conversations start with No.

A simple challenge is to ensure that all supply chain conversations start with Yes, then the implications of Yes being understood.

This will make the supply chain team be perceived as proactive and part of the team, rather than reactive and obstructive.

While the issue is complex, from my perspective these are a couple of things you could consider around re-shaping the supply chain conversation in your business.

James Small

Principal

Carrigan

James Small has been consulting in integrated business planning and change management for more than thirty years and was a managing partner at Oliver Wight for over 10 years. He has since established his own consultancy, Carrigan to provide a practical model to support the deployment of Sales & Operations Planning (S&OP).

Should you have any questions about the article or S&OP please contact James Small directly. If you have any interest in attending Supply Chain executive events please contact John Whitehead.